VALMT: Future Performance Will Reflect Slower Services And Stable Outlook

Analysts have reduced their price target on Valmet Oyj by approximately EUR 0.20 to account for slightly weaker expected revenue growth and profitability, particularly given slower service growth.

Analyst Commentary

Analysts note that the latest price target adjustment reflects a more balanced risk and reward profile for Valmet Oyj, as expectations for revenue growth and margin expansion are recalibrated to slower service demand.

Bullish Takeaways

• Bullish analysts highlight that, even after the downgrade to Hold, the EUR 30 price target still implies modest upside from current trading levels. This suggests the stock is not viewed as structurally overvalued.
• They see the services business as fundamentally attractive over the long term, arguing that current weakness appears cyclical rather than structural, which could provide upside if growth normalizes.
• Valmet's diversified portfolio and installed base are seen as supportive of recurring revenue, underpinning cash generation and helping to limit downside risk to the valuation.
• Execution on cost efficiency and integration of past acquisitions is viewed as a potential catalyst for margin resilience. If delivered consistently, this could warrant a valuation re rating.

Bearish Takeaways

• Bearish analysts argue that the slower service growth undermines one of the key pillars of the equity story, limiting near term earnings momentum and justifying a more cautious Hold stance.
• They see limited catalysts in the coming quarters to drive a re acceleration in top line growth, which may cap multiple expansion and keep the share price range bound around the current target level.
• Concerns are raised that softer service demand could pressure operating leverage, increasing execution risk on profitability targets and making current valuation metrics appear full.
• Some also highlight macro uncertainty in core end markets, warning that any further slowdown could trigger additional estimate cuts, putting the EUR 30 target at risk of future downward revisions.

What's in the News

• Valmet will convert Fortum's Zabrze CHP plant boiler from coal to biomass and RDF in Poland, supporting an EUR 85 million retrofit that is expected to cut annual fossil CO2 emissions by about 280,000 tonnes and fully eliminate coal use at the plant by late 2027 (Client Announcements).
• Wuzhou Special Paper has selected Valmet to rebuild a relocated paper machine and supply two extra wide winders in Hubei, China, extending the lifecycle of a Valmet manufactured machine and increasing capacity in recycled fluting and liner grades, with start up targeted for early 2027 (Client Announcements).
• Valmet will deliver a CFB boiler, flue gas treatment and automation system to Cheng Loong Corporation's Houli paper mill in Taiwan, enabling greater use of waste and biomass fuels and an estimated annual CO2 reduction of 48,000 tonnes (Client Announcements).
• The company will begin change negotiations in Finland regarding temporary layoffs covering more than 950 employees in its Packaging and Paper business area and Global Supply unit. It seeks to adjust capacity and improve cost efficiency amid weaker demand, with layoffs planned for the first half of 2026 (Discontinued Operations/Downsizings).
• Valmet has reiterated its 2025 guidance and expects net sales to remain at approximately the 2024 level of EUR 5,359 million, indicating stable topline expectations despite a softer market backdrop (Corporate Guidance).

Valuation Changes

• Fair Value: edged down slightly from approximately €28.46 to €28.29 per share, reflecting a modest reduction in intrinsic value estimates.
• Discount Rate: risen slightly from about 7.56 percent to 7.79 percent, indicating a marginally higher required return and risk assumption.
• Revenue Growth: reduced noticeably from roughly 4.00 percent to 3.08 percent, signaling more cautious expectations for top line expansion.
• Net Profit Margin: fallen significantly from around 9.44 percent to 7.91 percent, pointing to softer anticipated profitability.
• Future P/E: increased meaningfully from about 11.7x to 14.3x, suggesting a higher valuation multiple being applied to forward earnings despite the lower growth and margin assumptions.